Check Your Grain Marketing Emotions at the Door

This week has been kind of cold and miserable in southwestern Ontario, but I did see the first signs of spring with tractors and wagons rolling by my farmyard as you go into Dresden Ontario.  There is something about the rumble of empty grain wagons that I abhor.  When I’m pulling them, myself it usually sounds a lot better as it means I’ve delivered my grain.  However, when I hear them go by in the fall and I cannot combine for whatever reason there is no worse sound. That rumble means I’m getting behind by the minute.  Let’s hope these guys this week were selling soybeans for over $20 a bushel.  That’s worth the rumble any day.

At the present time in Ontario new crop corn can be contracted for just a little bit over $7 a bushel and soybeans can be contacted for $17.83 a bushel.  Historically speaking those are very good prices, but of course what is historically speaking referring to. I’m sure there’s lots of farmers out there who sold corn for $9 or $10 in the last couple of years and soybeans for over $20 who don’t think present day prices are good.  With me being a farmer, I fully understand. Sometimes my own emotional bias can get away affecting my marketing decisions in the new crop year.

I particularly feel this way when I discuss farm marketing with my non farming friends. They hear the prices from me, and they tell me that they’d sell immediately based on history. I’m always thinking about it, sometimes agreeing with them on an intellectual level but still have a hard time pulling the trigger.  A good case in point would be pricing 2023 SRW wheat in Ontario.  Last year some farmers sold wheat over $15 a bushel based on a vertical market price spike coming off the heat of the Ukraine Russia war.  The only way you could have priced wheat at $15 plus was through a standing order at the elevator. It was that fast, like a blink of the eye.  Today, the local option is to price new crop wheat at $8.50 a bushel?

Am I going to price Ontario wheat tomorrow morning at this price? NO! Hah!  I’m holding out for $15!   At least that’s the way it feels subconsciously in the back of my mind. Realistically though, I need to check my biases and appreciate what market I’m dealing with. Many times, the differences between old crop markets and new crop markets are stark. 2023 is no different in that regard.

As a farmer I see this bias all the time. For instance, old crop corn can be sold today at Ontario elevators for approximately $7.70 a bushel. Old crop soybeans can be sold for over $20 a bushel. On the corn side old crop is about $0.70 higher than new crop. On the soybean side old crop is about $2.20 higher than new crop.  That’s just the way it is, based on all the cash market factors and the risk ahead in getting that theoretical new crop to the harvest finish line.  Generally speaking, the old crop and new crop markets especially at this time of the year are totally different realities.

The challenge for eastern Canadian farmers is to determine how the new crop market will react going forward.  With regard to corn and soybeans, it helps when you look at seasonality within the new crop market. Often, new crop corn will top out in mid-June and soybeans will top out in early July.  That’s often a sweet spot for when new crop contracts can be made.  However, and it’s a big however, sometimes crop prices do not follow that script. There is that South American seasonality too.  That’s one reason why daily market intelligence is key because in 2023, especially with the war going on in one of the world’s breadbaskets, grain fundamentals can be askew. That’s exactly what we had in 2022.

This might seem difficult for many farmers to wrap their head around. However, it gets even harder for eastern Canadian farmers because of the value of the Canadian dollar.  At the present time the Canadian dollar is at approximately .7352 US.  This is very low historically and it’s leading to big Canadian basis values. However, if that suddenly changed and the dollar went back to 85 cents US within a period of maybe four to five months, our cash grain prices in Ontario would go much lower. Of course, that would depend what futures prices did as well. Needless to say, it is a management challenge or even a management puzzle for Canadian farmers to balance both futures markets risk, with foreign exchange risks which affect our cash markets deeply. Our American friends rarely consider foreign exchange in their crop marketing plans.

There is so much more to this, but much of it has to do with your own personal bias on crop prices and market information.  For instance, last fall you could sell corn off the combine for $8.60 a bushel.  That’s almost a dollar higher than corn is worth today in Ontario. Some of that is foreign exchange related. Some of it is not. However, it’s all risk and it’s something that eastern Canadian farmers face every day when they decide to price their crops.  Just because those new bins shine in the late autumn sun, doesn’t mean they should be filled.

It’s not for the faint of heart, but of course for many of us we are hardwired to deal with it.  Taking our personal bias and our emotions out of grain marketing will always be a challenge for most of us. It certainly is for me.  Standing pricing resting orders sitting at the elevator or your processor can help with that.  At least, it puts down a stake in the marketing shifting sands.

Of course, there is also that nervous part of crop marketing where you estimate how comfortable you are marketing a portion of your crop at a time of the year when it’s only a figment of your imagination. That’s the reality right now for many of us as the early March cold winds blow.  Keep in mind, that snow laden soybean field in the back of your mind will one day turn golden yellow and green. There might even be a few weeds in it.  It’s likely you’ll get to sell those beans.  Check those emotions at the door.  Our starting gun on planting will be here before you know it.